Letter to the trading Community of Tasmania (12th July 2021) - Shipping and Logistics Update

12th July 2021

Situation Update

Domestic?

By all accounts the Bass Strait operators continue to service Tasmania very well. Searoad have successfully implemented the MV Lieket in the market and the extra capacity along with previously implemented Tolls vessels will be welcomed as we begin the march into peak season (that said, reports of good lifting by all carriers suggests that our current domestic trade volumes are good and well catered for). TT Line services have been strong and supportive of freight movements. Speaking to most transport companies both in Tasmania and on the Mainland, they report that there is significant stress on driver availability and skill shortages are concerning. All transport operators report that there have been no issues with trans-border movements with the COVID outbreak in NSW and accordingly the essential worker status system works well. It was encouraging to have Australia Post reverse its decision to cease to carry perishable cargoes and this is welcomed by many producers in Tasmania. Coastal services around Australia are fully subscribed and accordingly there is very little options for shippers to use coastal shipping for their movements (Fremantle / Brisbane) and as a result there is heavy congestion on the rail network to support these destinations / origins with delays in securing space becoming a challenge. Industrial action in Sydney also recently caused a reduction in rail capacity which has added additional stress to movements from this location.

International Airfreight?

International airfreight remains challenging with passenger flights still restricted and with the international arrival caps recently introduced, there is concern that there may be further reduction to capacity in the market. Industry representatives are hopeful that the international freight assistance mechanism (IFAM) will be extended into 2022 as a support measure for air freight services. At present export and import air rates remain very high and there is again some concern that along with reduction to capacity with the arrival caps freight prices may increase in the month ahead. At time of writing all airfreight shipments that I am aware of have been successfully executed for export and import, but this has come at significant costs. The current situation with global seafreight with congestion and equipment challenged (see next section) has added to the air freight capacity as shippers turn to airfreight in some cases to mitigate delays with sea-freighted goods.

International Ocean Freight

Regretfully there is little positive to report from the May 2021 report on this topic. Indeed, the situation has deteriorated even further with the predictive comment in the May report, “If I had to predict the future, I would suggest that exporters would continue to struggle with equipment and space for some time” unfortunately ringing true for many parties in Tasmania as well as globally. Significant stress on equipment (containers) is the current challenge in Tasmania with regular reports of cargoes not being able to be shipped due to insufficient containers on the island. Reports of a lack of all types of equipment are regularly received and shipments of valuable exports are simply not being able to be loaded for markets. Freight rates continue to increase to and from most markets with additional costs above freight rates not uncommon (Tauranga New Zealand discharge fee of US$1000.00 per container is applicable for containers that need to be returned back to Tauranga from Auckland or Metroport after unloading – this is one such recent surcharge).

MSC service recently advised that two of its planned vessels for Tasmania would omit the State in July. The reasoning behind this is that the Tasmanian rule for transfer of international crew is that they need to be at sea for a period of 14 days prior to arriving in Tasmania. With crew changes undertaken in Brisbane, this meant that the 14-day rule would not be met, as the transit time from Brisbane to Tasmania is significantly less. One of the vessels worked in Brisbane and Sydney (exemptions are in place in these States) however due to said protocols the vessel (laden with Tasmanian cargoes) changed route to Noumea to comply with Tasmanian COVID rules. Exporters and importers need to be aware of these circumstances and look to plan for delays that may occur from time to time because of crew changes to this service. The impact of this situation has seen cargoes destined for Tasmania delayed for an additional 11 days and exports delayed for the same period. Additionally, a further constraint on empty equipment compounds the challenges.

Please consider the following in your planning.

·???????Export containers are in very short supply in Tasmania and other mainland ports – delays in receiving equipment for export should be expected. Exporters may consider alternatively moving goods to Melbourne for cross docking (although equipment shortages are being felt in Melbourne as well).

·???????Exporters may need to consider loading in 40’ equipment if 20’ equipment is not available.

·???????Exporters should expect delays in receiving export bookings due to restrictions on international destinations (some lines are not accepting bookings for Middle East and India ports due to equipment planning and transshipment schedule issues).

·???????Exporters should expect rates to continue to increase as equipment and space issues compound.

·???????Exporters should be aware that in some circumstances the shipping lines are favouring repositioning of empty equipment back to Asian ports over full laden export containers. Reasoning for this is that it that there is a shortage of equipment in Asian ports, full containers reduce the number of containers available to be shipped (dead weight being high particularly with 20’ equipment), shipping lines are looking to take advantage of the high freight rates between Asia USA and Asia Europe.

·???????Trans-shipment ports are still congested and delays should be expected when using a service via Singapore, Port Kelang or Busan.

·???????Industrial action at some Australian ports has influenced schedule reliability with vessels changing rotation – in some circumstances, ships will call Melbourne before Sydney. This can impact exporters with receival windows being reduced quickly with little notice resulting in cargo not being able to make booked vessel (over booking on following vessels compounds the issue).

·???????Shipping lines are reducing their free time allowances in order to pressure traders to turn containers around quickly – it is important to be aware of the free time allowances in place for export and import shipments and manage this well as large costs can be incurred.

·???????Exporters to New Zealand need to be aware that there are significant challenges in New Zealand with port omissions to regain schedule integrity occurring often – this can impact export transit times. Equipment and space for this market is significantly challenging with some lines reporting they cannot offer bookings until mid – August.

·???????Yantian port congestion has eased slightly, however there is significant congestion at the ports with a back log of trucking and bookings – this will take some time to remedy.

·???????Space and equipment in most Asian ports is still concerning and Australian importers are experiencing large delays in securing bookings and equipment. Consideration for less than a container movement of goods where possible should be considered as well as use of non operating reefers (reduced capacity in containers).

·???????Shipping lines report that it is likely that import rates will continue to increase on a fortnightly basis as demand out performs capacity and equipment.

·???????Risk to existing capacity to Australian ports is beginning to emerge with some shipping lines reporting that some chartered vessels on the service are due to expire and ship owners are demanding higher charges to commit. Charter rates have tripled in some cases with traditional yearly charter periods being changed to three year commitments. With high rate levels between Asia and the USA and Asia and Europe, it is likely that the charter market will focus on these trade routes.

·???????Traditional routings from many international ports has changed (some significantly) as shipping lines contend with congestion at transshipment ports and look to regain schedule integrity. Exporters and importers should carefully understand the routing of their shipments as in some cases we are hearing of additional transit times of over 40 days in extreme cases.

·???????Importers need to be aware of protocols around Biosecurity and are reminded to check regularly on protocols for Khapra beetle and Brown Marmated Stink Bug requirements and ensure that suppliers are using approved treatment providers at all times and have supporting documentation at time of importation (confer with your customs broker to discuss this in more detail).

·???????Importers should ensure that all documentation relative to customs clearance is submitted to their customs broker as early as possible to ensure that all documentation is correct and lodged prior to the cargo arriving. There has been regular system issues with the ICS and biosecurity systems with downtime and importers should plan to avoid just in time clearances where at all possible.

·???????International importers of inputs into mining, agriculture, aquaculture and forestry can now look to begin to accrue TFES of A$700.00 per 20’ container for claiming in October 2021. The finer details of the scheme are being considered, however from the 01st of July the support will be claimable.

Final Comment

It is fair to say that I have never been more concerned for the trading community of Tasmania than now. Speaking to those in the industry (globally) there is little relief in sight for the challenges facing importers and exporters (and indeed our community as a result) and many industry insiders are stating that this is set to escalate for the remainder of 2021 and into 2022 at least. Whilst there continues to be stimulus packages being rolled out globally and recovery from COVID19 scenarios remains forefront in Governments around the world, regretfully there appears to be no solution to capacity and infrastructure to support the growth in the short term. Shipping lines, freight forwarders, transport and logistics providers alike will always work to find positive outcomes for their customers that drive our economy and if any of the statements above turn out to be wrong, we will be the first to put our hand up as in this we would be happy to be wrong.

As always, I am available on call to clarify any aspect of this communication. ?

Yours faithfully

Brett Charlton

Chairman – Tasmanian Logistics Committee

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